Is Inventory Management the Most Crucial Issue for Restaurant Owners?

By Rodney Laws, Contributor

Running a restaurant is a dream for countless people throughout the world, but the idyllic picture of raking in profit while enjoying world-class food isn’t quite representative of the reality. In truth, running a restaurant takes a remarkable amount of work — and impressive business acumen.  

What’s more, owners don’t have the time, money, or energy to pay full attention to all the challenges of the industry, so it’s essential that they understand how to prioritize. This naturally leads to the question of which issues warrant the most care. Where should their focus go?

You might initially think about elements such as food quality, the guest experience, or even marketing, but there’s something else that can get overlooked -- inventory management. Sourcing ingredients and storing them correctly is incredibly important, but is it the most crucial issue?  

Let’s consider why restaurant inventory management matters so much.

Insufficient Stock Ruins Restaurant Menus

Most eateries have highlighted items that are widely considered their best, leading to most orders featuring them. In the event of miscalculations and the necessary ingredients run out, it can be hugely damaging to the company’s reputation — who would want to go to a restaurant renowned for its fries if it keeps running out of fries?

It isn’t enough to securely protect those core ingredients, though. As the zeitgeist shifts and different types of food rise or fall in popularity, orders inevitably change, and you could one day find that everyone wants to get a different item from your menu. The standard expectation will always be that every item on your menu will be available. Fail to meet it, and you’ll look sloppy.

Excess Food Stock Often Can’t be Used

Let’s say you go in the other direction to meet demand by ordering more food than you can realistically expect to use. Can that work? Well, for certain types of food (such as canned goods), yes — but not for most of them. If you keep them cool but fail to use them promptly, they’ll rapidly lose quality and start to rot (which will also threaten the rest of the ingredients). 

And if you try to get around this be freezing your excess ingredients, it won’t get you very far. Not all items are suitable for freezing, plus the maintenance of a massive freezer will soon rack up some major energy bills. In addition, using fresh ingredients is a hallmark of quality in the restaurant business, so using frozen foods will damage your reputation.

Restaurant Inventory System Upgrades are Worth Doing Early

When it comes to determining the priority of an issue, it’s seriously worth considering how easily it can be addressed. After all, there’s little sense in putting all your energy towards an ongoing issue if there’s something else of comparable significance that you can outright resolve first. This is one of the strongest arguments for inventory management being the most crucial issue. You can implement a system to handle it, then move on to other things.

What’s more, the kind of system you’d use to manage your inventory would have many other functions revolving around centralized information. It would help you keep track of things including customer loyalty, dietary requirements, and records of complaints. Just as in retail, receiving a well-personalized experience makes a customer more likely to return. The smarter you make the core of your business, the smoother your operation will become.

Restaurant Profit Margins are Slender

Lastly, inventory management is such a big deal for restaurants because profit margins tend to be very slender in the food industry. Once you account for the ingredients, the location, the staff, and everything that goes into the daily operation, there might only be a small profit on the average menu item. This means that a small miscalculation regarding the stock could cause a remarkable amount of damage. 

If you could make a particular dish for $5 and sell it for $20, then you could afford to be rather more casual about the prospect of seeing ingredients go to waste. However, the restaurant market can be brutal. Consider that even a top-notch eatery with great ratings and an award-winning menus are only one bad year away from closing. Inefficiency isn’t a realistic option.

Now that we’ve put some thought into the consequences of inventory management, we can return to the titular question: is it the most crucial issue for restaurant owners? If we’re being purely conceptual, then no, because food quality has to take the top stop.

If we’re being practical, though, then there’s a strong case. Inventory management is something you can meaningfully improve at an operational level without massively adding to your workload. If you work on it now, you can largely get it out of the way, allowing you to focus on food, service, and marketing.

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